PMFBY: Farmers Fear Scheme Dilution as TN Government Flags Increasing Premium Share

The much-celebrated ‘Pradhan Mantri Fasal Bima Yojana’ (PMFBY) is running into troubled waters. After the Narendra Modi-led Bharatiya Janata Party (BJP) ‘revamped’ the scheme in February 2020, capping the Centre's contribution, states are now complaining of an increase in financial burden.

The government of Tamil Nadu has urged the Union Government to remove the cap on premium subsidy, demanding a reversion to the earlier formula of an equal share from the Centre and state governments, citing financial concerns.

The farmers have accused the BJP government of tactically withdrawing from the crop insurance scheme after initially proclaiming that it would serve the interests of farmers. The future of the scheme itself hangs in the balance, as state governments could refrain from implementing it citing financial constraints, said farmers' association leaders.

‘BURDEN OF STATES INCREASING’

The issue has started receving attention more than 17 months after the cap fixed by the Union Government on the premium in both the PMFBY and the Restructured Weather Based Crop Insurance Scheme (RWBCIS).

“The union cabinet decided to fix the cap on premium at 25% for irrigated crops and 30% for rain-fed crops. When the scheme was introduced in 2016, the Union and state government paid an equal share of the premium. This move will now burden the state governments and dilute the scheme,” said P Shanmuganm, general secretary of Tamil Nadu unit of the All India Kisan Sabha (AIKS).

The Chief Minister of Tamil Nadu, M.K. Stalin, in a letter to the prime minister on July 28, detailed the case. “The share of the state government has increased to Rs 1,918 crores in 2020-21 from Rs 566 crores in 2016-17 after the cap was fixed,” he claimed in the letter.

Further, the share of the state government has increased to Rs 2,500 crores due to the actuarial premium rates (APR) quoted by the insurance companies empanelled by the Centre, the CM added.

“The share of the state governments will increase with the union government fixing a cap on its share. This opens the doors for the state governments to distance themselves from the scheme, which will leave the farmers without any insurance scheme,” Shanmugam added.

‘REVERT TO OLD FORMULA’

The Tamil Nadu government and the farmers organisations are demanding that the Centre restore the 2016 formula. Shanmugam questioned the Centre retaining the name (PMFBY) despite having a premium share which was much lesser than that of the states.

“The union government has reduced its share and still wants to retain the name of PMFBY. Let them restore the 49:49:2 ratio which was implemented until the previous crop year and then retain the name,” he said.

The CM also pointed out the high APR quoted by the insurance companies leading to a surge in the share of the state government. “The insurers are quoting high APR for reasons that include high loss ratio and lack of support from reinsurers,” he said.

However, Shanmugam said that the insurance companies were making huge profits after the scheme came into existence. “The modality of increasing the APR is unacceptable. These companies have made huge profits in the previous years. This increase would only further extend that," he added.

‘CENTRE SHOULD BE FLEXIBLE’

In February 2020 the Centre claimed that revamping PMFBY will offer more flexibility to the states. The Union Government said that the states could add any or many additional risk covers and features like prevented sowing, localised calamity, mid-season calamity and post-harvest losses.

Shanmugam questioned the possibilities and financial concerns of the already struggling state governments. “The flexibilities have apparently been encorporated to localise the insurance scheme. Several state governments have accused the Union Government of choking the revenues of the states," he said.

The Cabinet also decided ‘not to allow the state governments to implement the scheme in subsequent seasons in case of considerable delay by states in release of requisite premium subsidy to concerned insurance companies beyond a prescribed time limit.

“This shows the commitment of the union government towards the interest of the insurance companies. The same interest must be shown towards the farmers who struggle for a minimum support price and fight increase in input costs,” said R. Ravi, Kanyakumari district secretary of the Tamil Nadu Vivasayigal Sangam.